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Technological progress is an excellent example of how deflation helps the average person. Your money buys more and more compute power each year. Central banks

Technological progress is an excellent example of how deflation helps the average person. Your money buys more and more compute power each year. Central banks are targeting inflation, which slowly robs the saver of purchasing power. Areas with high government regulation and control suffer from price inflation, where you get less and less each year for the same money: healthcare, education, war.

PKop 11y ago
And though prices are continually falling for tech goods, people do not refrain from buying (as the myth says they will). You know the iPhone you buy today will be much less next year, but you still buy because it serves a purpose for you now. They only type of spending perpetually lower prices would probably decrease is speculative buying. If you don't need a particular good now, you may wait knowing the price will fall. But this is also a good thing.
- julianz 11y ago
  Disagree, I've refrained from buying several products in recent years because I know if I can keep the old one going for one or two more product generations then the new one will be much, much better. It also influences my choice of product, I'm more likely to get something high end and keep it for longer.
  - PKop 11y ago
    OK, but in a general sense, the number of computing devices being purchased continues to grow. Apple keeps setting iPhone sales records. Your examples, I would argue, are a good thing. People buy only when they absolutely need these goods, not because they are afraid they need to buy in excess now because their savings is going to lose value relative to the cost of these goods. They get full use out of the goods they purchase. Less wasteful spending, and wasteful use of resources needed to produce them. Moore's law illustrates that the cost of computing power has continually fallen. The industry has certainly not suffered because of this, would you agree? So without putting to fine a point on it: The tech industry is as healthy as any in the entire economy. And yet, prices fall faster than just about any other. Consumers unambiguously benefit from these falling prices. Keep this in mind when economists or politicians sing the praises of "mild" inflation. This would certainly benefit governments who want to run a deficit and spend money they have to borrow. But I'd argue this does not benefit the consumer. Thought experiment: will you plan on spending more on discretionary items (entertainment, vacation, home remodeling, investments, whatever...) if you anticipate / observe rising prices on staples such as food, healthcare, rent/mortgage, gas, utilities, etc? Or, will you spend more on discretionary items if you anticipate / observe falling prices on those same items? Your available budget will be greater and of course your spending will increase in these areas if you have more money to spend. So the utility, or benefit you receive as a result is clearly higher. Debtors benefit from rising prices because they can pay off debt with cheaper currency. So, as previously mentioned government, the biggest debtor, promotes inflationary policy.
steve19 11y ago
An article on HN recently argued that we DO in fact have deflation on healthcare. Treatments from 1970 are probably a lot cheaper today but in anycase I would rather get an expensive MRI from a lab with a recent model MRI Scanner rather than a cheap scan from an old CT Scanner. If you could choose between 1970s treatments at 1970s-equivalent prices or 2015 treatments at 2015 prices, which would you choose? I would definitely choose modern treatment every time. As for inflation, as long as demand outstrips supply (even just because of population growth), we should expect some inflation. The problem is that when deflation occurs it generally means underlying economic issues.
tw04 11y ago
Education has become more and more DEREGULATED over the last 15 years, so you're going to need to go back to the drawing board with that one.
- flashman 11y ago
  If you're going to present numbers on the change in education's cost, you'll need to pair them with changes in its quality. No point using deregulation to lower prices if you needed higher prices to deliver it at a decent quality.
eru 11y ago
Deflation for particular products is different than deflation in general, which eg includes labour.
digi_owl 11y ago
That is one odd definition of deflation. Anyways, the reason deflation is worriesome is that it is downright lethal to anyone with debt. Just look at the great depression and its deflationary death spiral. Companies were dropping prices to try to sell anything at all, but the debt was ratcheting up faster, and to they keeled over in droves. Compared to that mild(!) inflation is preferable, at least as long as wages keep up. This because debt is rarely inflation adjusted, and thus gets easier to manage over time. Note thought that the only examples of "hyperinflation" are more likely to have been foreign exchange related. This because in both cases you were dealing with nations with little to no exports, and massive foreign expenses.

PKop 11y ago

And though prices are continually falling for tech goods, people do not refrain from buying (as the myth says they will). You know the iPhone you buy today will be much less next year, but you still buy because it serves a purpose for you now. They only type of spending perpetually lower prices would probably decrease is speculative buying. If you don't need a particular good now, you may wait knowing the price will fall. But this is also a good thing.

julianz 11y ago
Disagree, I've refrained from buying several products in recent years because I know if I can keep the old one going for one or two more product generations then the new one will be much, much better. It also influences my choice of product, I'm more likely to get something high end and keep it for longer.
- PKop 11y ago
  OK, but in a general sense, the number of computing devices being purchased continues to grow. Apple keeps setting iPhone sales records. Your examples, I would argue, are a good thing. People buy only when they absolutely need these goods, not because they are afraid they need to buy in excess now because their savings is going to lose value relative to the cost of these goods. They get full use out of the goods they purchase. Less wasteful spending, and wasteful use of resources needed to produce them. Moore's law illustrates that the cost of computing power has continually fallen. The industry has certainly not suffered because of this, would you agree? So without putting to fine a point on it: The tech industry is as healthy as any in the entire economy. And yet, prices fall faster than just about any other. Consumers unambiguously benefit from these falling prices. Keep this in mind when economists or politicians sing the praises of "mild" inflation. This would certainly benefit governments who want to run a deficit and spend money they have to borrow. But I'd argue this does not benefit the consumer. Thought experiment: will you plan on spending more on discretionary items (entertainment, vacation, home remodeling, investments, whatever...) if you anticipate / observe rising prices on staples such as food, healthcare, rent/mortgage, gas, utilities, etc? Or, will you spend more on discretionary items if you anticipate / observe falling prices on those same items? Your available budget will be greater and of course your spending will increase in these areas if you have more money to spend. So the utility, or benefit you receive as a result is clearly higher. Debtors benefit from rising prices because they can pay off debt with cheaper currency. So, as previously mentioned government, the biggest debtor, promotes inflationary policy.

steve19 11y ago

An article on HN recently argued that we DO in fact have deflation on healthcare. Treatments from 1970 are probably a lot cheaper today but in anycase I would rather get an expensive MRI from a lab with a recent model MRI Scanner rather than a cheap scan from an old CT Scanner. If you could choose between 1970s treatments at 1970s-equivalent prices or 2015 treatments at 2015 prices, which would you choose? I would definitely choose modern treatment every time. As for inflation, as long as demand outstrips supply (even just because of population growth), we should expect some inflation. The problem is that when deflation occurs it generally means underlying economic issues.

tw04 11y ago

Education has become more and more DEREGULATED over the last 15 years, so you're going to need to go back to the drawing board with that one.

flashman 11y ago
If you're going to present numbers on the change in education's cost, you'll need to pair them with changes in its quality. No point using deregulation to lower prices if you needed higher prices to deliver it at a decent quality.

eru 11y ago

Deflation for particular products is different than deflation in general, which eg includes labour.

digi_owl 11y ago

That is one odd definition of deflation. Anyways, the reason deflation is worriesome is that it is downright lethal to anyone with debt. Just look at the great depression and its deflationary death spiral. Companies were dropping prices to try to sell anything at all, but the debt was ratcheting up faster, and to they keeled over in droves. Compared to that mild(!) inflation is preferable, at least as long as wages keep up. This because debt is rarely inflation adjusted, and thus gets easier to manage over time. Note thought that the only examples of "hyperinflation" are more likely to have been foreign exchange related. This because in both cases you were dealing with nations with little to no exports, and massive foreign expenses.